An undisclosed company is leasing a prime 2.9654-acre plot of land in Nairobi owned by Kenya Power for Sh3.7 million per year per acre, less than half the market value of the land.
Auditor General Nancy Gatongo wondered how the undisclosed company could lease the land for 10 years at such a low price when the market rent for the land is Sh8.7 million per acre per annum.
Ms Gathungu revealed that Kenya Power’s internal valuers valued the land in February 2023 at a much lower price than the actual price based on the valuation carried out in June 2020.
The undisclosed company has leased the land for 10 years and will pay a total rent of Sh110,000,000. Had the company leased the land based on its actual value as per the 2020 valuation, it would have collected rent of Sh257,989,800.
“The decline in the reserve value of land rents has not been supported or explained. “As a result, the company was at risk of losing rental income amounting to Sh147,989,800 during the lease period,” Ms Gatongo said.
“In addition, the valuation carried out in February 2023 was conducted by Company employees rather than independent professional valuers. Although the Company employees were qualified valuers, it was not possible to ensure their independence and objectivity.
Kenya Power, which has an extensive network of distribution and transmission lines and related infrastructure across the country, owns several plots of land on lease.
In the year to June 2024, the value of the company’s freehold land was Sh785.7 million.
However, Ms Gatongo raised the alarm over the company’s lack of title deeds for 16 plots of land worth Sh29.7 million.
However, the authority stated that most of the plots that did not have title deeds were allocated from trust land and that there were delays in the demarcation of areas and judicial separation processes required to facilitate obtaining documents.
Kenya Power has leased many of its plots of land to third parties. However, the company is struggling to recover rent from some tenants, according to the Auditor General.
Ms Gatongo revealed that 38 tenants who rented the company’s premises in Mombasa have defaulted in paying rent totaling Sh13.9 million.
“However, the tenants have since vacated the building without settling the rents owed, with some debts dating back eight years. She said that the administration did not provide procedures to recover the rents owed.